Advisory Board

  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Peter Clarke
  • Barry Diller
  • IAC/InterActiveCorp
  • Fu Chengyu
  • China National Petrochemical Corporation (Sinopec Group)
  • Richard J. Gnodde
  • Goldman Sachs International
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V.
  • Jiang Jianqing
  • Industrial and Commercial Bank of China, Ltd. (ICBC)
  • Handel Lee
  • King & Wood Mallesons
  • Richard Li
  • PCCW Limited
  • Pacific Century Group
  • Liew Mun Leong
  • Changi Airport Group
  • Martin Lipton
  • New York University
  • Wachtell, Lipton, Rosen & Katz
  • Liu Mingkang
  • China Banking Regulatory Commission (CBRC)
  • Dinesh C. Paliwal
  • Harman International Industries
  • Leon Pasternak
  • BCC Partners
  • Tim Payne
  • Brunswick Group
  • Joseph R. Perella
  • Perella Weinberg Partners
  • Baron David de Rothschild
  • N M Rothschild & Sons Limited
  • Dilhan Pillay Sandrasegara
  • Temasek International Pte. Ltd.
  • Shao Ning
  • State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC)
  • John W. Snow
  • Cerberus Capital Management, L.P.
  • Former U.S. Secretary of Treasury
  • Bharat Vasani
  • Tata Group
  • Wang Junfeng
  • King & Wood Mallesons
  • Wang Kejin
  • China Banking Regulatory Commission (CBRC)
  • Wei Jiafu
  • Kazakhstan Potash Corporation Limited
  • Yang Chao
  • China Life Insurance Co. Ltd.
  • Zhu Min
  • International Monetary Fund

Legal Roundtable

  • Dimitry Afanasiev
  • Egorov Puginsky Afanasiev and Partners (Moscow)
  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Johan Aalto
  • Hannes Snellman Attorneys Ltd (Finland)
  • Nigel P. G. Boardman
  • Slaughter and May (London)
  • Willem J.L. Calkoen
  • NautaDutilh N.V. (Rotterdam)
  • Peter Callens
  • Loyens & Loeff (Brussels)
  • Bertrand Cardi
  • Darrois Villey Maillot & Brochier (Paris)
  • Santiago Carregal
  • Marval, O’Farrell & Mairal (Buenos Aires)
  • Martín Carrizosa
  • Philippi Prietocarrizosa & Uría (Bogotá)
  • Carlos G. Cordero G.
  • Aleman, Cordero, Galindo & Lee (Panama)
  • Ewen Crouch
  • Allens (Sydney)
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Rachel Eng
  • WongPartnership (Singapore)
  • Sergio Erede
  • BonelliErede (Milan)
  • Kenichi Fujinawa
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Manuel Galicia Romero
  • Galicia Abogados (Mexico City)
  • Danny Gilbert
  • Gilbert + Tobin (Sydney)
  • Vladimíra Glatzová
  • Glatzová & Co. (Prague)
  • Juan Miguel Goenechea
  • Uría Menéndez (Madrid)
  • Andrey A. Goltsblat
  • Goltsblat BLP (Moscow)
  • Juan Francisco Gutiérrez I.
  • Philippi Prietocarrizosa & Uría (Santiago)
  • Fang He
  • Jun He Law Offices (Beijing)
  • Christian Herbst
  • Schönherr (Vienna)
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V. (Amsterdam)
  • Hein Hooghoudt
  • NautaDutilh N.V. (Amsterdam)
  • Sameer Huda
  • Hadef & Partners (Dubai)
  • Masakazu Iwakura
  • TMI Associates (Tokyo)
  • Christof Jäckle
  • Hengeler Mueller (Frankfurt)
  • Michael Mervyn Katz
  • Edward Nathan Sonnenbergs (Johannesburg)
  • Handel Lee
  • King & Wood Mallesons (Beijing)
  • Martin Lipton
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Alain Maillot
  • Darrois Villey Maillot Brochier (Paris)
  • Antônio Corrêa Meyer
  • Machado, Meyer, Sendacz e Opice (São Paulo)
  • Sergio Michelsen Jaramillo
  • Brigard & Urrutia (Bogotá)
  • Zia Mody
  • AZB & Partners (Mumbai)
  • Christopher Murray
  • Osler (Toronto)
  • Francisco Antunes Maciel Müssnich
  • Barbosa, Müssnich & Aragão (Rio de Janeiro)
  • I. Berl Nadler
  • Davies Ward Phillips & Vineberg LLP (Toronto)
  • Umberto Nicodano
  • BonelliErede (Milan)
  • Brian O'Gorman
  • Arthur Cox (Dublin)
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Sang-Yeol Park
  • Park & Partners (Seoul)
  • José Antonio Payet Puccio
  • Payet Rey Cauvi (Lima)
  • Kees Peijster
  • COFRA Holding AG (Zug)
  • Juan Martín Perrotto
  • Uría & Menéndez (Madrid/Beijing)
  • Philip Podzebenko
  • Herbert Smith Freehills (Sydney)
  • Geert Potjewijd
  • De Brauw Blackstone Westbroek (Amsterdam/Beijing)
  • Qi Adam Li
  • Jun He Law Offices (Shanghai)
  • Biörn Riese
  • Jurie Advokat AB (Sweden)
  • Mark Rigotti
  • Herbert Smith Freehills (Sydney)
  • Rafael Robles Miaja
  • Robles Miaja (Mexico City)
  • Alberto Saravalle
  • BonelliErede (Milan)
  • Maximilian Schiessl
  • Hengeler Mueller (Düsseldorf)
  • Cyril S. Shroff
  • Cyril Amarchand Mangaldas (Mumbai)
  • Shardul S. Shroff
  • Shardul Amarchand Mangaldas & Co.(New Delhi)
  • Klaus Søgaard
  • Gorrissen Federspiel (Denmark)
  • Ezekiel Solomon
  • Allens (Sydney)
  • Emanuel P. Strehle
  • Hengeler Mueller (Munich)
  • David E. Tadmor
  • Tadmor & Co. (Tel Aviv)
  • Kevin J. Thomson
  • Barrick Gold Corporation (Toronto)
  • Yu Wakae
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Wang Junfeng
  • King & Wood Mallesons (Beijing)
  • Tomasz Wardynski
  • Wardynski & Partners (Warsaw)
  • Rolf Watter
  • Bär & Karrer AG (Zürich)
  • Xiao Wei
  • Jun He Law Offices (Beijing)
  • Xu Ping
  • King & Wood Mallesons (Beijing)
  • Shuji Yanase
  • OK Corporation (Tokyo)
  • Alvin Yeo
  • WongPartnership LLP (Singapore)

Founding Directors

  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz
  • Nigel P.G. Boardman
  • Slaughter and May
  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz
  • Peter Williamson
  • Cambridge Judge Business School
  • Franny Yao
  • Ernst & Young

Monthly Archives: September 2014

EU UPDATE – Jumping the Gun: Marine Harvest Fined and Electrabel Appeal Rejected

Editors’ Note: Contributed by Nigel Boardman, a partner at Slaughter and May and a founding director of XBMA. Mr. Boardman is one of the leading M&A lawyers in the UK with broad experience in a wide range of cross-border transactions. Authored by Ingrid Lauwers and Nele Dhondt of Slaughter and May.

Executive Summary:   The European Commission has fined Marine Harvest, a Norwegian seafood company and salmon processor, €20 million for acquiring Morpol without prior clearance and not long before, the Court of Justice rejected an appeal against a General Court judgment which upheld a fine imposed, also €20 million, on Electrabel for its acquisition of Compagnie Nationale du Rhône. The recent fines indicate that the Commission takes the notification obligation and the ‘stand-still’ obligation very seriously and will penalise parties who fail to comply, even if failure to do so is due to negligence.

Main Article:

INTRODUCTION

The European Commission has fined Marine Harvest, a Norwegian seafood company and salmon processor, €20 million for acquiring Morpol without prior clearance.[1] The decision comes in the wake of the Court of Justice (“ECJ”) rejecting an appeal against a General Court judgment which upheld a fine imposed on Electrabel for its acquisition of Compagnie Nationale du Rhône (“CNR”).[2] The Electrabel fine also amounted to €20 million.

THE LAW

Under Article 4(1) EUMR, a concentration which falls within the scope of the EUMR must be notified to the Commission before completion.[3] This requirement is reinforced and completed by Article 7(1) which prohibits a concentration from being implemented until it has been declared compatible with the internal market. Implementing a merger before obtaining clearance is known as ‘gun-jumping’, and the prohibition on completion before clearance is often referred to as the ‘suspensory’ or ‘stand-still’ obligation.

The Commission can impose fines of up to 10% of the concerned undertakings’ aggregated turnover if these requirements are breached intentionally or negligently.[4] In setting the level of the fine, the Commission takes into account the nature, the gravity and the duration of the infringement.

On 18 December 2012, Marine Harvest acquired a 48.5% stake in Morpol, one of the largest salmon processors in the EEA. Marine Harvest only notified the acquisition to the Commission on 9 August 2013. On 30 September 2013, the Commission gave clearance on condition that Marine Harvest divest a number of Morpol’s assets, including salmon farming operations in Scotland.[5] The acquisition was therefore implemented eight months before the Commission was notified and nine months before clearance had been given.

Fining decision

On 23 July 2014, the Commission imposed a fine of €20 million on Marine Harvest for breach of the ‘stand-still’ obligation, which constitutes a serious infringement of the merger control rules. By acquiring a 48.5% stake in Morpol, it found that Marine Harvest had acquired de facto sole control. The Commission concluded that Marine Harvest had a stable majority at shareholders’ meetings due to the wide dispersion of the remaining shares and previous attendance rates. As Marine Harvest had completed the acquisition before notifying the Commission (and before the Commission gave clearance) it was found to have breached both Article 4(1) and Article 7(1) EUMR.

The Commission stated that, as a large company, Marine Harvest should have been aware of its notification obligations, and so it had been negligent by not seeking prior clearance. Further, Marine Harvest’s breach was deemed serious as the acquisition raised such concerns as to require significant divestment conditions. As such, completion of the acquisition before its conditional clearance could have given rise to competition problems.

The Commission also considered mitigating circumstances, which included the fact that Marine Harvest had not exercised voting rights in Morpol after acquiring control. In addition, the Commission recognised that Marine Harvest had informed it through pre-notification contacts shortly after completion of the acquisition.

The Commission clarified that its conditional clearance decision was not impacted as the breach related only to the ‘stand-still’ obligation and did not alter the Commission’s market analysis.

ELECTRABEL Facts

On 23 December 2003, Electrabel, a producer of electricity, natural gas and other energy services, acquired approximately 50% of CNR, another electricity producer. The acquisition gave Electrabel around 48% of the voting rights in CNR. Electrabel notified the Commission of the acquisition on 26 March 2008, some four years after completion had occurred.[6]

On 10 June 2009, the Commission decided that a serious breach of the ‘stand-still’ obligation had been committed and fined Electrabel €20 million.[7] The Commission found that Electrabel had become CNR’s main shareholder on 23 December 2003 and so had acquired de facto sole control which required prior clearance.

Electrabel appealed the Commission’s decision to the General Court. The appeal was dismissed on 12 December 2012,[8] and was made on grounds that the Commission had incorrectly characterised the acquisition as a concentration. Electrabel also alleged that the Commission had made a number of errors in its finding of sole control, and that the proposed penalty was time-barred.

In dismissing the appeal, the General Court held that breach of the ‘stand-still’ obligation was not merely procedural, and that, although the acquisition raised no competition concerns, this was not relevant to determining the gravity of the breach. Although the breach occurred through negligence, this did not reduce the penalty.

On 21 February 2013, Electrabel appealed to the ECJ.[9]

Judgment

On 3 July 2014, the ECJ also rejected Electrabel’s appeal, stating that Electrabel had submitted new arguments which the ECJ did not have jurisdiction to consider.

Electrabel’s further appeal had several grounds which included the allegation that the duration of its breach should not have been relevant to the General Court’s or Commission’s assessment. Further, Electrabel alleged that the General Court and Commission had applied the law retroactively in that it had erroneously applied the provisions of the EUMR, Regulation 139/2004, before it had come into force. Electrabel submitted that the EUMR’s predecessor, Regulation 4064/89, should have been applied instead.

Dismissing the appeal, the ECJ affirmed settled case law which establishes that it is not permitted to introduce new arguments in an appeal since this would inappropriately seize the appeal court of a wider ambit than had existed in lower tribunals.

CONCLUSION

The recent €20 million fines indicate that the Commission takes the notification obligation and the ‘stand-still’ obligation very seriously and will penalise parties who fail to comply, even if failure to do so is due to negligence. The Commission expects commercial entities to be aware of the notification obligations and will further expect the diligent performance of them.


[1]     Case M.7184, 23.07.2014.

[2]     Case C-84/13 P, judgment of 03.07.2014.

[3]     Concentrations will fall within the EUMR if they have an EU dimension, i.e. if they meet certain turnover thresholds (per EUMR, Article 1(2)).

[4]     EUMR, Article 14(2).

[5]     Case M.6850, 09.08.2013.

[6]     Case M.4994, 26.03.2014.

[7]     Ibid.

[8]     Case T-332/09, 12.12.2012

[9]     Case C-84/13 P, above.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

MEXICAN UPDATE – Mexico’s Landmark Energy Reform is Enacted

Contributed by: Manuel Galicia Romero and Juan Pablo Cervantes, Galicia Abogados, S.C. (Mexico City)

Editors’ Note: Manuel Galicia Romero is a founding partner of Galicia Abogados and a member of XBMA’s Legal Roundtable. Mr. Galicia, who was involved in the negotiation of the North American Free Trade Agreement (NAFTA), is a leading expert in international transactions in Mexico.  Juan Pablo Cervantes is a member of Galicia Abogados and an international business lawyer actively involved in the promotion of trade and investment between Mexico and numerous countries, particularly from Asia.

Highlights:

  • Considering the Constitutional amendments enacted late last year, resulting in the opening of the energy industry to private investment, especially oil and gas, among other laws, the Federal Executive published the Hydrocarbons Act (“HA”) earlier last month.  The HA reaffirms the newly revised principle enshrined in the Mexican Constitution that all hydrocarbons underground belong to the State and its rights thereto may not be transferred or encumbered.
  • The HA gives the Ministry of Energy the power to award assignments to Petróleos Mexicanos (including its subsidiaries) or any other productive state enterprises (“PSEs”) to perform the recognition and superficial exploration, and the exploration and production of hydrocarbons (“E&P”), with the prior favorable opinion of the National Hydrocarbons Commission (the “CNH”), on round zero and on an exceptional basis thereon, as well as to amend them.
  • The Mexican State may enter into contracts for E&P activities through the CNH with (i) Pemex, (ii) other PSEs or (iii) companies organized under Mexican law, or with consortiums entered into by any of these companies. Such contracts shall be awarded after a public tender process. The aforementioned joint ventures shall be governed by general commercial law and shall not be deemed public-private partnerships.
  • The Energy Reform gave way to a new Law of the Electrical Industry, which establishes an entirely new regulatory framework for the power industry in Mexico where the Mexican state reserves exclusivity over certain strategic areas and otherwise permits the participation of private investment in all other areas that make up the power industry in the country, including the generation and open-market marketing of electricity.

MAIN ARTICLE

  • Energy Reform:  Secondary Legislation.

On August 11, 2014, several new laws and amendments to existing legislation were published in the Federal Official Gazette (“DOF”) in order to implement the constitutional amendments related to the energy industry that were published in the DOF on December 20, 2013.

 

In the notes linked below we analyze the new Hydrocarbons Act and the new Law of the Electrical Industry, as well as other relevant legislation that was enacted or amended as part of this reform.

  • New Hydrocarbons Act (Ley de Hidrocarburos).

As a result of the opening of the energy industry to private investment, especially oil and gas in the amendments to Articles 25, 27 and 28 of the Mexican Constitution, published on December 20, 2013, the Federal Executive published the Hydrocarbons Act, which is effective as of August 12, 2014, and repeals the Regulatory Act for Article 27 of the Constitution for the Petroleum Industry (Ley Reglamentaria del Artículo 27 Constitucional en Materia de Petróleo). The most relevant aspects of this law include the ability of the private sector to enter into exploration and extraction contracts with the state (under new schemes, namely, licenses, and production or profit sharing agreements), and to pursue activities such as refining, transportation, distribution and storage of hydrocarbons, as well as the importation and retail of gasoline and diesel.  For a brief summary of Hydrocarbons Act, click here.

  • New Law of the Electrical Industry (Ley de la Industria Eléctrica).

The new Law of the Electrical Industry (Ley de la Industria Eléctrica) repeals the former Law on the Electricity Public Service (Ley del Servicio Público de Energía Eléctrica), in effect since 1975, and establishes an entirely new regulatory framework for the power industry in Mexico, where the Mexican State reserves exclusivity over certain strategic areas and otherwise permits the participation of private investment in all other areas that make up the power industry in the country, including the generation and open-market marketing of electricity.  For a brief summary of the Law of the Electrical Industry, click here.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

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